TF2 Steam Workshop sales “broke Paypal”; Gabe Newell explains

Ten times as much TF2 content comes from its users - the hats, the guns and the brogues of the Steam Workshop - as comes from its creators. Such is its success that professional game developers make more selling TF2 gear than they do in their day jobs; that the Workshop moved beyond Paypal’s comprehension within two weeks of its launch.

Says Gabe Newell: “We’ll go up against Bungie, or Blizzard, or anybody, but we won’t try to compete with our own user base.”

“So we think that we’re super-productive and kind of badass at making TF2 content, but even at this early stage we cannot compete with our own customers in the production of content in this environment,” admitted Newell in an illuminating economics talk at the University of Texas this week.

“The only company we’ve ever met that kind of kicks our ass is our customers. We’ll go up against Bungie, or Blizzard, or anybody, but we won’t try to compete with our own user base. Because we already know that we’re going to lose.”

Newell went on to reveal that the Steam Workshop’s top TF2 seller has earned $500,000 in a single year - and that’s after Valve take their cut.

“The first two weeks we did this we actually broke Paypal,” he continued. “I don’t know what they were worried about, maybe drug dealing. So we actually had to work something out with them and said, ‘No, they’re making hats. Not drugs’.”

Running the Workshop got ever more complex from there, it seems. Valve began to see inflation and deflation. They began to see users creating their own “mediums of exchange” - currencies outside the boundaries of Steam. And they began to see countries creating regularly structures. In Korea, for instance, Workshop sellers are required to pay a form of income tax on their virtual earnings.

“And so you get like, ‘Okay, wait. Should we increase the drop rate for those customers to offset the tax? Then what do we do about purchase price parity? Should we adjust drop rates to provide welfare to people who are applying in lower income [countries]?”, said Newell.

“We started to see problems with liquidity, where at certain times of day the mediums of exchange sort of dried up and all of a sudden you had weird little financial crises erupting in your TF2 hat exchange [system].

“So when we started to see these kinds of issues we said, ‘We should probably start talking to an economist’.”

It was a process that would end with the hiring of Valve in-house economist Yanis Varoufakis. And the Workshop has run smoothly ever since. Hasn’t it? I suppose we’d better check. How’s the TF2 hat economy looking on this fine Friday?